from the development of local players who are stepping up their game against multinationals. Companies like Natura Cosmeticos from Brazil and Grupo Bimbo from Mexico are just two developing market consumer companies actively expanding into new markets.

Analysts at Davy Research who follow the sector say that as local manufacturers get bigger and more savvy, they are turning to internationals for more reliable and high-quality supply.

That is especially true in China, where a 2008 scandal involving tainted milk made consumers wary of local brands.

China's top milk producer, China Mengniu Dairy, this week agreed to sell more of itself to Danone as it tries to win customers. Denmark's Arla Foods, another dairy supplier, also has a stake in Mengniu.

HEALTHY INNOVATION

The average consumer goods maker spends about 8 to 10 percent or more of its sales on advertising and marketing and just 2 percent on research and development. Over time, R&D spending has come down as categories mature and companies cut costs, leaving them to outsource technical development to their suppliers.

"I think they have always been marketing companies," said JPMorgan analyst John Faucher. "As the technologies and categories become more complicated, they simply need to cast a broader net."

By contrast, flavour and fragrance companies often spend more than 7 percent of sales on R&D, and have been buying smaller makers of specialised ingredients for which they can charge higher prices and boost margins.

"They want your M&M to be the right blue and for the melt characteristics to be exactly right," said a banker who has advised on deals in the sector. "They're not trying to sell flour to bakers."

Last year, Tate & Lyle bought a maker of oat beta glucan, and in January IFF bought a maker of complex specialty ingredients, while Symrise is trying to take over Sweden's Probi , which makes probiotic ingredients for yoghurt. Israel's Frutarom Industries has bought 12 companies since 2011.

A technical arsenal is handy as brands yield to more pressure to make their goods healthier or more natural. This month alone, Kraft Foods removed an artificial preservative from its Singles cheese, and U.S. Subway restaurants removed a chemical from its bread found in rubber yoga mats. A U.S. Senator has since called on regulators to ban the chemical.

In that light, Tom Pirko of Bevmark Consulting said ingredients companies that are entrepreneurial and creative write their own tickets.